It's that time of the year when salaried professionals and businesses start approaching chartered accountants or check out online platforms to file their income tax returns. Although the deadline for filing ITR July 31st is more than a month away, doing it as early as possible is a way to avoid errors and the hassle that comes with last minute stress.
But before you move ahead with filing returns, its important to know whether you need ITR-1 or ITR-2 forms, since the wrong choice could lead to a notice from tax authorities.
Difference between ITR-1 and ITR-2
The Income Tax Return-1 form, also known as Sahaj, is for Indian residents who earn an income up to Rs 50 lakh from salary, dividend and fixed deposit interest, and own one house.
Income Tax Return-2 forms are different as they are meant for residents and non-residents earning more than Rs 50 lakh from foreign shares, and have assets outside India as well as investments in unlisted equity shares.
Who is eligible for ITR-1?
For filing returns using ITR-1, the income from agriculture if any should also be below Rs 5,000.
The form can be filled online through the Income Tax e-filing portal, and most information will be prefilled using information about financial transactions already with the tax department.
Income Tax authorities also get information on interest and dividends from banks, so failure to disclose that correctly will lead to a demand for a revised filing.
Who should go for ITR-2?
ITR-2 needs to be filled by taxpayers who have generated their income by selling equity shares, mutual fund units and property or are earning capital gains.
It is also mandatory for anyone who is a director in a company, and has foreign bank account, employee stock options, or securities accounts.
Failure to disclose all such assets in Schedule FA could also invite penalties.
